Marine Cargo insurance is a contract where you can be compensated against losses that arise due to Marine Cargo adventure by land, air and sea. This ensures that your goods are protected during loading and unloading, whilst in storage and also being transported.
There are a number of different policies available and it would depend upon the nature and frequency of shipments as to which was most suitable for you and your business.
Cover is continuous for all shipments/transits within the agreed scope of the policy. A ‘minimum and deposit is calculated and charged at inception based upon the estimated sendings provided by the client. On expiry of the policy, the actual sending’s are declared premium is adjusted accordingly. The advantages of an annual policy include reduced administration, which can result in cheaper premiums and cover is tailor made for the client with no requirement to declare prior to shipment unless goods are outside the agreed parameters.
Open Cover Policies
Open cover policies are permanent policies without a renewal date and are reviewed on their anniversary date. This type of policy offers permanent cover and there is no minimum premium to be paid, however, the administration is greatly increased and there would be monthly debiting and calculation of premium. Again the insured must also notify the insurers if there are any changes or the sum insured exceeds the maximum policy limit.
This type of policy is more suited to those businesses that rarely import or export and issued for one particular shipment. The premium is paid in full as and when cover is required however, there is no automatic cover and the insured is wholly responsible for ensuring that the goods are covered prior to shipment. Often this type of policy will have a higher level of premium.
Stock Throughput Policies
A Stock Throughput Policy is a combination of marine transit, all risks policy and a stock policy and is intended to provide continuation and consistency of cover. Like Marine policies they are tailored to the Insured’s specific business requirements and ensures there are no gaps in cover and little change in cover conditions. The administration is also greatly reduced.
In order to provide a quotation, Underwriters would require an estimated value of goods sent to and from each territory and the maximum limit for any one consignment. Underwriters would also consider the type of cargo being carried, how it is packed, the voyage being undertaken and the method of transport.
They would also need to know the terms of sale; Ex Works, Free on Board (FOB) or Cost, Insurance and Freight (CIF). Ex Works policies provide cover for the goods for the entire journey once they leave the sellers premises.
Free on Board policies are utilised where the seller is responsible for the goods until they are ‘over the ships rails’ where responsibility then shifts to the buyer. Cost, Insurance and Freight policies are used when goods are sold on a CIF basis and the seller needs to arrange full insurance on a ‘warehouse to warehouse’ basis.
In cargo Insurance there is a choice of clauses applicable. Institute Cargo Clause A covers ‘all risks’, Clause B covers only a range of specified perils including fire, explosion, stranded or sunk vessel, collision, forsaking of cargo at a location other its destination in the event of an emergency, washing overboard and entry of seawater. Clause C is narrower still and does not insured the last two eventualities.
There are over 150 other Institute Clauses and many of these are tailored to meet the needs of specific trades. A full list of clauses can be found in your policy documentation.
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As with any insurance policy there are exclusions and we have highlighted some of these below for you: (A full list of exclusions will be noted on your schedule)
- Insufficient or unsuitable packing.
- Inherent Vice of the subject matter.
- Ordinary leakage, loss in weight or wear and tear.
- Loss, damage or expense caused by delay.
- Wilful misconduct of the assured.
- Financial default of the owners, managers or charterers of the vessel.
- Atomic, nuclear or radioactive force.
- Unseaworthiness of the vessel.
War, Strikes, riots, civil commotions and terrorism are also specifically excluded although cover is subsequently added back in by the inclusion of the Institute War & Strikes Clauses in the policy.
Institute War Clauses
Provides cover for loss or damage caused by:
War, civil war or hostile act by a belligerent power.
Capture, seizure, arrest or detainment arising from the above.
Derelict mines, torpedoes, bombs or other derelict weapons of war.
General average and salvage charges. Whilst cargo is waterborne or airborne only.
Institute Strike Clauses
Provides cover for loss or damage caused by:
Strikers, locked out workmen, labour disturbances, riots or civil commotion.
Any terrorist or person acting from a political motive.
Terrorism cover is only provided ‘in the normal course of transit’.
Frequently Asked Questions
The simple answer is to reduce your exposure to financial loss. If you’re an exporter who has not been paid for the goods at the time of shipment, or an importer who has paid for all or part of the goods prior to receiving them, you run the risk of suffering a financial loss if the goods are lost or damaged during transit.
Additionally, you may be required to post a bond and/or cash deposit in order to obtain release of your cargo following a general average even though there was no loss or damage to your goods. By purchasing insurance, your insurance company assumes the responsibility and can usually expedite the release of your cargo.
General Average is an internationally accepted principle of equity dating back to ancient times. Essentially, if one or more interests involved in a maritime adventure voluntarily sacrifices all or part of their goods to save all interests from an impending peril or loss, the interests saved will reimburse the interest suffering the loss so that each shares the loss equally.
A classic example used to illustrate this principle is that of a vessel which runs aground in a storm and is threatened with loss of the entire vessel and its cargo unless the vessel can be refloated. Efforts to refloat the vessel–such as the jettison of cargo to lighten the vessel; or expenses paid to a salvor to pull the vessel off the grounding point–would be shared by the vessel and all cargo interests.
When you ship through Distribution, you are insured up to the $10,000,000 limit regardless of whether it is shipped via air freight or commercial trucking company, and Mail-parcel post.
When the terms of sale include insurance coverage up to the title transfer of goods, the buyer may purchase additional insurance from the provider known as a contingency policy. A contingency policy will provide insurance coverage for the goods once the title has transferred and the goods are no longer covered under the seller’s insurance policy. If goods are damaged upon arrival to the buyer and the title has transferred, the policy would pay the damage and the buyer’s insurance company would subrogate against the seller’s insurance.
We negotiate very favorable terms with our cargo insurance carriers and would be pleased to offer you a free, no obligation comparison. By arranging cargo/shipping insurance in volume, our rates and terms are very competitive.
Your transportation carrier will pay your losses only if you purchase specific cargo insurance from them, in these cases the coverage is provided. However, this coverage is usually insufficient and can end up costing you more, as they are not obligated to pay for your losses that occur beyond their control (such as in the case of a General Average Claim).
Depending upon your specific needs, most insurers will extend their ocean cargo policies to include domestic shipments; provided there are no state insurance regulations prohibiting them from doing so. In the latter instances, insurers can usually arrange a companion domestic transit policy.
Anybody (broker/agent/shipper/consignee) but if the insurance payment is to be issued to another party having no insurable interest, the party having interest should give written authorization.
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Making the small print...BIG
A Fair Presentation of the Risk
At the heart of insurance contracts is an obvious truth: you have an enormous advantage over the insurer. You know all about your business, its history, processes, people and management, but the insurer knows nothing – other than what you tell them.
You have a statutory duty to make a fair presentation of the risk. You must tell the insurer:
• Every material circumstance which you know or ought to know and/or
• Sufficient information that would cause the insurer to make further enquiries, if necessary, to review those material circumstances
• You are deemed to have the knowledge of the company’s senior management.
• You are deemed to have the knowledge of the person arranging the insurance (who is deemed to be a senior manager under statute).
• Anything that can be discovered by a reasonable search.
A failure to make a fair presentation of the risk gives the insurer various remedies, depending upon the nature of the failure, from avoiding the contract and not paying claims to modifying the basis of settlement.
Examples of Misrepresentation
It is often easier to demonstrate the consequences of risk presentation failure by example rather than theory. Here are some real life examples of typically forgotten or unrevealed material facts which later caused huge problems and repudiated claims:
A reprocessing plant did not reveal a series of small fires during their insurance year.
Following repeated false alarms, a retailer didn’t reveal that Police Response had been withdrawn.
A restaurant omitted to reveal repeated minor floods from an upstairs nightclub.
A construction company didn’t reveal potential employee claims recorded in their accident book.
A company failed to reveal written warnings to an employee over repeated dangerous driving.
A company failed to reveal that it had been ‘struck off’ by Companies House and was trading as a new legal entity under a different designation.
Compiling the Risk Presentation: an ongoing process
The compilation of risk information for presentation to an insurer might be thought to be simply contained in a proposal or risk presentation form, however, such forms are not exhaustive and cannot take account of circumstances which change beyond their
compilation. Moreover, merely referring insurers to your website or dumping data is not making a fair presentation of the risk. ’Fairness’ is a subjective test but it would certainly involve simplicity, clarity and relevant selection.
Ongoing communication is vital, because the duty to disclose material circumstances is ongoing throughout the insurance year and at renewal of the insurances.
It is not possible to overstate the importance of researched, adequate risk presentation – there have been countless legal disputes, repudiated claims, ruined businesses and lives arising from the simple failure to reveal all the facts to an insurer. A failure to present risk adequately is a bigger risk than the risk you present.
It doesn’t matter that the failure is innocent, something overlooked, forgotten or discounted as unimportant – it might be important to the insurer, in which case it must be revealed.
Should there be anything not yet disclosed, or that you are unsure would influence your insurers about this insurance tell your broker/insurer immediately.
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Working With Us
The Business Insurance Bureau conducts both client and market research to identify solutions to the needs of an almost exclusively business clientele. We will make a recommendation once we have assessed your demands and needs.
All premiums due to insurers must normally be paid by you on or before the date that cover commences. Where alternative methods of payment are available these will be discussed with you so that arrangements can be put in place by the due date.
We are registered with the Data Protection Registrar. We will ensure that any information obtained from you is treated by us and anyone else involved in arranging, considering to arrange or managing your insurance, as Strictly Private and Confidential. We will not provide your information to anyone else unless we:
have your permission to do so, or -are required to by the FCA, or -are required to do so by law, or -are required to do so in the normal course of arranging or negotiating and maintaining, or renewing financial services products which we may from time to time approve.We take appropriate steps to ensure the security of any money, documents, other property or information handled or held on your behalf.
All information in any form, with the exception of policy documents and certificates issued on behalf of insurers and supplied by us, to you, should be treated as Strictly Private and Confidential and not be released directly or indirectly to any other party, without our explicit consent.
Note: in transacting your insurances with The Business Insurance Bureau, you are deemed to have accepted our Terms of Business. Your accepting of these Terms of Business does not affect your statutory rights.
You must notify us as soon as possible of a claim and circumstances which may give rise to a claim. In the event of a claim you should contact this office and we will promptly advise you and if appropriate, issue you with a claim form and pass all details to your insurer. You should not admit liability or agree to any course of action, other than emergency measures carried out to minimise the loss, until you have an agreement from your insurer. We will remit claims payments to you as soon as possible after they have been received on your behalf. In the event that an insurer becomes insolvent or delays making settlement we do not accept liability for any unpaid amounts.
You would have the right to cancel a policy within 14 days of its inception or upon receipt of the policy documentation whichever is the later. You would as a Consumer and without providing a reason, cancel the policy by confirming this is in writing to the address of our office through which your policy was placed. Any policy documentation and in particular any legal document, i.e. Certificate of Motor Insurance, Employers Liability Certificate, MUST be returned with your instruction to cancel. By exercising your right to cancel the policy, you are withdrawing from the contract of insurance.
Our services may be terminated without cause or penalty by giving one months’ notice in writing. In the event that our services are terminated by you other than at the expiry of the policy we will be entitled to retain any fees and all of the brokerage payable. The responsibility for handling claims reported after the date of termination shall in the absence of an express agreement be the responsibility of the party taking over the role.